Correlation Between Micron Technology and VP Bank

Can any of the company-specific risk be diversified away by investing in both Micron Technology and VP Bank at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Micron Technology and VP Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Micron Technology and VP Bank AG, you can compare the effects of market volatilities on Micron Technology and VP Bank and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Micron Technology with a short position of VP Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Micron Technology and VP Bank.

Diversification Opportunities for Micron Technology and VP Bank

-0.31

Correlation Coefficient

Micron Technology  VP Bank

Very good diversification

The 3 months correlation between Micron and VPBN is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Micron Technology and VP Bank AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VP Bank AG and Micron Technology is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Micron Technology are associated (or correlated) with VP Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VP Bank AG has no effect on the direction of Micron Technology i.e., Micron Technology and VP Bank go up and down completely randomly.

Pair Corralation between Micron Technology and VP Bank

Allowing for the 90-day total investment horizon Micron Technology is expected to under-perform the VP Bank. In addition to that, Micron Technology is 2.37 times more volatile than VP Bank AG. It trades about -0.07 of its total potential returns per unit of risk. VP Bank AG is currently generating about -0.03 per unit of volatility. If you would invest  8,180  in VP Bank AG on September 12, 2024 and sell it today you would lose (480.00) from holding VP Bank AG or give up 5.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.43%
Values	Daily Returns

Micron Technology  vs.  VP Bank AG

Micron Technology

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Micron Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Micron Technology unveiled solid returns over the last few months and may actually be approaching a breakup point.

VP Bank AG

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in VP Bank AG are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, VP Bank is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Micron Technology and VP Bank

The main advantage of trading using opposite Micron Technology and VP Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Micron Technology position performs unexpectedly, VP Bank can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in VP Bank will offset losses from the drop in VP Bank's long position.

The idea behind Micron Technology and VP Bank AG pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.